LinkedIn (LNKD) Put Credit Spread

LNKD has no real competition, an unbelievable growth rate and no long term debt. What else could you want?

The Dow’s all-time high has now been tackled and it looks like stocks are bearing down to topple the S&P 500 high next. The market will have to pullback at some point whether it is next week or next year. Here is a trade idea on a company that has had quite a run too and this option strategy will give this stock a chance to pullback and still profit just like the market.

The trade: Sell the April 165/170 Put Credit Spread (selling the April 170 put and buying the April 165 put) for $1.05 or better.

The strategy: The maximum potential profit for this trade is $1.05 if LNKD is trading above $170 at April expiration. The maximum loss is $3.95 ($5.00 – $1.05) if LNKD is trading below $165 at April expiration. Breakeven is $168.95 at expiration based on a $1.05 credit.

The rationale: LNKD is the world’s largest professional network on the internet. The company has no real competition, an unbelievable growth rate and no long term debt. The stock has marched higher from about $100 back in November of 2012 to where it is currently trading around $180. What else could you want out of a stock or company?

On Thursday, the stock hit its all-time high after breaking through a minor resistance area (previous high) and closed right at that level which should now be support. Many times a stock will come down and retest its old resistance area before moving higher once again. If LNKD weakens or the market pulls it down some, the stock still has two other previous pivot levels which might act as support to keep the stock above the 170 strike and in profitable territory.

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